Oil drops nearly $1 on economic gloom
Reuters
First Posted 04:59:00 01/09/2009
Filed Under: Oil & Gas - Downstream activities, Markets & Exchanges
NEW YORK — Oil prices fell another 2.2 percent on Thursday as deepening economic gloom and soaring crude inventories in the United States eclipsed geopolitical tensions that have put world supplies at risk.
The decline followed Wednesday's 12 percent drop, which marked the biggest daily percentage decline in the price of crude oil in more than seven years.
"This morning crude was trying to rally a bit, but more (economic) figures kept coming out from the US and they were very bearish indeed," said Sucden brokerage trader Rob Montefusco.
US crude for February delivery fell 93 cents to settle at $41.70 a barrel, while London Brent crude fell 97 cents to $44.89 a barrel.
Oil prices have dropped more than $100 a barrel since July as a global financial crisis has cut consumer and business energy demand, threatening to shrink total world oil usage for the first time in 25 years.
A US government report on Thursday showed the number of people remaining on jobless rolls last week rose to a 26-year high, even as new claims for unemployment benefits slipped.
Adding to the economic gloom, Wal-Mart Stores Inc, which accounts for a 10th of US retail spending, reported a disappointing sales performance in December and cut its earnings outlook.
Oil prices tumbled on Wednesday after the US Energy Information Administration's weekly report showed crude stocks rose last week by 6.7 million barrels, more than seven times the 900,000-barrel increase analysts had expected.
"Brent is done going under $40, but WTI (US crude) is a different animal altogether ... crude stocks in the Midwest are very high because Cushing is a landlocked base with pipes that only go in one direction," Christopher Bellew of Bache Financial said.
Crude oil stocks in Cushing, Oklahoma, the delivery point for US crude futures, rose 4.1 million barrels last week, reaching a record high of 32.2 million barrels.
Prices had gained some support earlier from violence in Gaza, widening natural gas supply disruptions due to a dispute between Russia and Ukraine, and mounting evidence of OPEC's compliance with production cuts.
Three rockets fired from Lebanon struck northern Israel, slightly wounding two people and prompting the Jewish state to respond with artillery fire, officials said.
While the conflict did not directly threaten any oil supplies, Middle East unrest can bolster prices because countries in the region pump about a third of the world's oil.
Russia and Ukraine failed to resolve a gas supply dispute at a meeting in Moscow, but will continue talks to end the confrontation, which has choked off supplies to Europe, a senior Ukrainian gas official said on Thursday.
The dispute has cut heating fuel supplies hundreds of thousands of people across the Balkans and hit supplies as far west as France and Germany as Europe faces freezing temperatures.
Signs that members of the Organization of the Petroleum Exporting Countries are implementing the group's biggest-ever output cuts grew this week after Kuwait and Iran told customers of bigger January supply curbs.
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